How Saving $1,000 Annually in Union Dues Can Turn into Real Money
The U.S. Supreme Court’s Janus decision affirmed the right of government workers to opt-out of a union and mandatory dues, which means they no longer have to financially support membership to a union. While there are lots of factors in deciding whether to stay or leave a union, certainly the financial savings is a big one. That’s why PRI designed a calculator to help workers understand the financial impact of not paying union dues. Using the calculator, I created several typical scenarios, assuming $1,000 in annual dues, a 3 percent rate of return, retirement at age 65, and a retirement period of 20 years.
A 30-year old, for example, who opted out of paying union dues will save a total of $62,276 by the time he or she retires at age 65. He or she can withdraw $4,064 each year in the course of a 20-year retirement period – all total $81,280. A 45-year old will save a total of $27,676 by age 65 and can withdraw $1,806 for a total amount of $36,120 during retirement.
Even those further along in their jobs can benefit. A 55-year old will accumulate $11,808 at age 65, which would provide him or her an annual income of $771 for a total of $15,420.
I assumed a 3 percent rate of return, which is very conservative. Young workers are generally advised to invest in stock funds that yield greater returns. For example, the 30-year old, who is now able to invest $1,000 and earn an average annual rate of return of 5 percent can accumulate $94,836 at age 65, provide him or her an annual income of $7,248 for a total of $144,960 over a 20-year period. In fact, leaving the union when you’re young offers the best financial payout, whether the money is being squirreled away for retirement years or for a down payment on a house.
To be sure, unions offer services that government workers may want, such as liability insurance. But unions are not the only places union workers can go to obtain insurance. Many private insurance companies offer liability insurance, which may be obtained at a cost far lower than union dues. Teachers, for instance, can contact the Association of American Educators, who already insure thousands of teachers nationwide.
In deciding whether to opt-out of their union, government workers might take to heart Ben Franklin’s advice. In fact, he turned out to be quite well off. In his will, he left several homes, 3,000 acres of land, a King of France picture with 408 diamonds, and a sizeable bank account.
Rowena Itchon is Senior Vice President of the Pacific Research Institute.